China's refined aluminum demand in the first half of this year rose 9.6% year on year to 17.5 million mt, on support from the real estate, power network and car sectors, state-owned nonferrous metals information division Antaike said in its aluminum sector report issued Sunday.
The agency said despite Beijing's tightening of monetary policies and rising macro risks, China's macroeconomic data has stayed within a reasonable range in H1, with domestic aluminum demand having kept stable growth as anticipated.
Despite a slowdown in China's real estate development and power network development growth in H1, Antaike said demand from the real estate and power network sectors in the second quarter was overall good.
It said other key aluminum consumers such as the car and aluminum alloy wheel sectors posted output growth in H1, thus lifting aluminum demand. Also, the home appliance sector did very well in H1, with output of refrigerator, air conditioner and washing machine industries posting output rise in H1, lending further support to aluminum demand.
China's aluminum supply in H1 was estimated at 18.59 million mt, up 19.8% year on year, with national aluminum output estimated at 18.55 million mt in H1, up 19.7% year on year. Net aluminum imports in H1 was 41,000 mt, up from net imports of 20,000 mt in the same period last year, Antaike data showed.
China has an aluminum surplus of 1.1 million mt in H1, as against a deficit of 440,000 mt in H1 2016, the data showed.
Meanwhile, China's aluminum sector tax-inclusive, weighted full cost in June was around Yuan 13,100/mt ($1,965/mt), compared with the three-month weighted average futures prices of Yuan 13,829/mt on the Shanghai Futures Exchange in June -- implying about 75% of the sector's output has stayed profitable, data from Antaike showed.
It said 99% of the Chinese aluminum smelters had seen positive cash flow in H1, thanks to China's supply side reforms, with the sector having enjoyed the longest profit phase since the financial crisis in 2008.
And with the fall in domestic alumina prices earlier this year, China's aluminum sector is expected to see improved operating costs in the remainder of this year, Antaike added.
NEW CAPACITIES START UP IN NORTHWEST, NORTH, EAST CHINA
Meanwhile, new aluminum projects have been commissioned in Q1, mainly in northwestern, northern and eastern China, Antaike said.
And with the continuous rise in domestic aluminum prices, aluminum capacities in high-cost areas have gradually resumed output in Q2, with cumulative resumed output capacity estimated at almost 600,000 mt/year, the agency said.
It however, noted that as it takes time for idled capacity to resume operations, output growth at some of the restarted capacity is expected to be seen in H2.
The country's operating aluminum capacity was more than 38 million mt/year as of end-June, up 4% year on year, estimates from Antaike showed.
Currently, around 700,000 mt/year of aluminum capacity is resuming, or are planning to do so.
Also, with new aluminum projects in northern, southern and southwestern China speeding up development pace, China's aluminum supply growth is likely to exceed market anticipation. And with a possible periodic mismatch of supply side reform progress and market supply, there would still be an imbalance in domestic supply and demand this year, according to Antaike.
CHINA'S 2017 ALUMINUM DEMAND SEEN 9.1% HIGHER AT 35.8 MIL MT
Antaike expects China's aluminum demand to hit 35.8 million mt this year, up 9.1% from 2016, while refined aluminum output is expected to rise 12% year on year to 36.6 million mt.
But China's future aluminum demand growth could be limited by tighter domestic monetary policies and trade tensions, according to Antaike.
The continuous tightening of monetary policies may impact domestic manufacturing and infrastructure sectors -- especially the slowdown in new real estate project development growth -- adversely affecting the transport and durable product sectors and capping aluminum demand growth.
Adding to this, Sino-US aluminum trade tensions have resulted in uncertainties in China's aluminum product exports, affecting domestic aluminum demand growth this year.
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